The Impact of Venture Capital Monitoring

The Harvard Law School Forum on Corporate Governance and Financial Regulation 2014-01-30

Summary:

Editor's Note: The following post comes to us from Shai Bernstein of the Finance Area at Stanford University, Xavier Giroud of the Finance Group at Massachusetts Institute of Technology, and Richard Townsend of the Tuck School of Business at Dartmouth College.

It is often argued that venture capital (VC) plays an important role in promoting innovation and growth. Consistent with this belief, governments around the world have pursued a number of policies aimed at fostering local venture capital activity. The goal of these policies has been to replicate the success of regions like Silicon Valley in the United States. However, there remains scarce evidence that the activities of venture capitalists actually play a causal role in stimulating the creation of innovative and successful companies. Indeed, venture capitalists may simply select companies that are poised to innovate and succeed, even absent their involvement. In this case, efforts by policy-makers to foster local venture capital activity would be misguided. In our paper, The Impact of Venture Capital Monitoring: Evidence from a Natural Experiment, which was recently made publicly available on SSRN, we examine whether the activities of venture capitalists do indeed affect portfolio company outcomes.

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Link:

http://blogs.law.harvard.edu/corpgov/2014/01/30/the-impact-of-venture-capital-monitoring/

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Tags:

academic research empirical research firm performance innovation oversight richard townsend shai bernstein venture capital firms xavier giroud

Authors:

R. Christopher Small, Co-editor, HLS Forum on Corporate Governance and Financial Regulation,

Date tagged:

01/30/2014, 12:20

Date published:

01/30/2014, 09:13